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Economy well on path of fiscal consolidation: Economic Affairs Secretary

Author: IANS/Monday, February 5, 2018/Categories: Economy

Economy well on path of fiscal consolidation: Economic Affairs Secretary

By Vishav and Manish Gupta

New Delhi - The Finance Ministry is confident of meeting next year's fiscal deficit target of 3.3%, citing lesser uncertainties ahead, even as it failed to achieve its target for 2017-18.

Calling this year's upward revision of fiscal deficit target to 3.5% from 3.2% a "one-off aberration", Economic Affairs Secretary Subhash Chandra Garg said the economy is well on its path of fiscal consolidation despite a "small pause of a year".

"Next year, we've planned for 3.3%. And since there would be lesser number of uncertainties next year, we believe that 3.3% is very credible," Garg said.

"To further improve the credibility of it, we have now proposed an amendment in the Fiscal Responsibility and Budget Management Act to statutorily bind the government to pin down fiscal deficit to 3% by 2021. We actually hope to do it much sooner," he added.

Garg said various factors, including the implementation of the Goods and Services Tax and shortfall in the non-tax revenue, led to a wider fiscal deficit in the current year -- factors which, he said, won't be there next year.

He said while the government received better proceeds in some areas like direct tax collections and disinvestment, overall it fell short by around Rs 50,000 crore (over $7.5 billion).

"That's the reason we have a fiscal deficit of 3.5%."

The Secretary said the economy was virtually in the last leg of fiscal consolidation and that concerns about fiscal deficit were "certainly overblown".

"Although not every quarter has that concern, most people believe that it's very strong fiscal consolidation, unparalleled of the government's undertaking this kind of fiscal consolidation in the world. But there are some sections which still have some reservations. To them I say that this concern is quite overblown."

There have been concerns on the job front as well from various quarters, with many experts pointing out the wider fiscal deficit would have been acceptable if there was higher public spending towards job creation, which is not the case.

Garg dismissed those concerns and said calculating job creation is a difficult thing because there are numerous ways of job creation, both direct and indirect.

"Job creation is not just what happens within the government, but also through the measures the government takes through different programmes."

"There are some direct ways like National Rural Employment Guarantee Scheme and there are some programmes like ASHA and mid-day meal scheme which generate employment for villagers.

"Then there are numerous programmes that create jobs indirectly... By government investment programmes in infrastructure like rural roads of Rs 90,000 crore and Awas Yojana of Rs 30,000 crore -- these are also ways of job creation," he said.

Garg added the third important way of job creation is by creating an enabling environment for the private sector, within which the biggest chunk is created by the so-called informal sector and the small and medium businesses.

Here the job creation per crore of rupees is much higher than in capital intensive industries, he said.

"The government has encouraged job creation in the private sector through Mudra Programme giving out loans to crores of people, the textile package, by reducing tax on MSMEs with a turnover up to Rs 250 crore and other ways of incentivising the private sector to employ more people like the government sharing the burden of provident fund," Garg said.

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